Vienna Insurance Group (VIE: VIG)

August 1, 2025 • Insurance • BUY RECOMMENDATION

#1 Insurer in CEE with Structural Growth, Earnings & Capital Resilience at a Discounted Valuation

Vienna Insurance Group is the #1 insurance group in Central and Eastern Europe – 50+ entities across 30 countries, c. 33m customers. VIG is a pure-play CEE insurer with c. 60% of GWP from non-life and c. 40% from life & health, operating in markets that are structurally underpenetrated and growing at twice the eurozone rate
VIG's CEE footprint gives it access to some of Europe's fastest-growing insurance markets, driven by rising living standards, a widening protection gap in life and health, and accelerating FDI into the region
The business has proven its resilience: automatic inflation pass-through, proprietary NatCat data models that competitors cannot replicate, and Solvency II at 271% (top 3 in Europe under EIOPA's 2024 stress test)
FY24 absorbed the worst-case scenario – a once-in-200-years nat cat event and an Austrian recession – yet delivered EPS +16%. 1Q25 confirms normalization. At c. 8x 2025E P/E vs. c. 12x for European insurance peers, the market is still pricing in 2024 headwinds as if they were structural while they are not

CEE insurance penetration remains structurally below Western Europe. The CEE region is expected to grow at twice the eurozone rate, providing a long growth perspective independent of European economic cycles. Multiple demand drivers:
- Rising living standards: wages are expanding fast in the insurable middle class vs. in the Eurozone – more cars, home renovations, private healthcare, as incomes rise
- Repatriation trends: Romania saw 850,000+ citizens return post-COVID, with Western consumption habits and insurance expectations. VIG’s Romania profit grew +46% in FY24; Bulgaria double digit; trends continuing in 2025
- Protection gap in life and health: state pensions structurally insufficient, public healthcare underfunded. Health premiums growing double-digit throughout the region
- Nearshoring / Foreign Direct Investment: accelerating foreign direct investment into CEE, adding new businesses, workers, and insurable risks at a structural rate
Extended CEE and Special Markets are becoming structurally more important: ISR growth of +14% and +50% in FY24, and +10.7% and +38% in 1Q25, reflect broad-based momentum

VIG's repricing mechanics act as a natural hedge: Austrian indexed contracts and annual CEE repricing systematically pass through claims cost inflation to customers – validated in 2022-2023 when VIG absorbed +20-30% cost inflation in certain lines without volume loss
Storm Boris demonstrated VIG’s reinsurance robustness: €617m gross claims, the largest loss event in VIG's 200-year history, yet the combined ratio only reached 93.4% in FY24, recovering to 92.3% in 1Q25
- Reinsurance renewed without any deterioration in terms: Deputy CEO Höfinger explains that there is no industry-standard NatCat model for CEE, meaning reinsurers rely heavily on VIG’s proprietary datasets built over decades across 50 entities and 30 countries. This informational advantage gives the group a structural data moat and pricing power in reinsurance negotiations that peers in the region cannot replicate
Very strong balance sheet: Solvency II at 271% (1Q25). EIOPA's 2024 stress test placed VIG in the top 3 (out of 48) most resilient European insurers, maintaining >200% solvency under stress before any management actions

VIG trades at c. 8x 2025E P/E vs. c. 12x for the STOXX Europe 600 Insurance Index – a c. 35% discount despite consistent earnings delivery. Two concerns explain the gap, both misread:
- “Austria stagnating, dragging profitability”. Austria EBT fell 13% in FY24. Why the market is wrong: Austria is c. 38% of profit but irrelevant to the growth thesis. Extended CEE and Special Markets posted ISR +14% and +50% in FY24. Growth is increasingly driven by Extended CEE and Special Markets
- “Storm Boris exposed structural NatCat risk”. Why the market is wrong: one-off, not a trend. The ratio was back to 92.3% in 1Q25, reinsurance renewed without deterioration
If perceived risks normalise, the stock could re-rate towards at least 10x P/E (still below peers) implying c. 25% upside. The upcoming 2026-2028 strategic plan (expected 2H25) may act as a catalyst by providing clearer earnings visibility and capital allocation guidance